The rate of inflation in “Israel” is increasing.. and raising the interest rate is close

Israel’s Central Bureau of Statistics says that the country’s annual inflation has accelerated at a faster-than-expected rate, boosting the odds of an interest rate hike, according to the Times of Israel.

  • Israeli economists expect inflation to continue rising over the next 12 months

newspaper quoted “Times of IsraelAccording to the Central Bureau of Statistics, the annual inflation in “Israel” decreased to 5.2% in February, compared to 5.4% in January, but it accelerated at a faster rate than expected, which increased pressure on the “Bank of Israel” to raise interest rates. Back in April.

The Consumer Price Index, (a measure of inflation that measures the average cost of household goods), rose 0.5% in February, above analysts’ expectations, for a 0.3% rise. Over the past 12 months, annual inflation reached 5.2%, compared to 5.4% in January. Analysts had expected an annual rate of 5%.

In February, increases were seen in the prices of fresh vegetables and fruits, which rose by 3.8%, culture and entertainment costs rose by 0.9%, transportation costs by 0.5%, and housing prices by 0.4%. On the other hand, the prices of clothing and shoes decreased, down 3.3%, and communications, down 0.4%, according to the Central Statistics Department.

Rents on contract renewals also increased by 4.4%, and rents on contracts for new tenants increased by 7.5%.

Although inflation eased in February to its lowest reading since October, the rate is still well above the government’s target price range of 1%-3%.

This comes despite the steps taken by the Bank of Israel to curb rising inflation. Over the past year, the central bank has steadily raised interest rates from a record low of 0.1% last April in an attempt to slow price growth.

And in February, the Bank of Israel raised the interest rate for the eighth consecutive meeting, raising the key lending rate by 50 basis points to 4.25% – the highest level since 2008.

The Monetary Policy Committee of the Bank of Israel will announce its decision regarding the next interest rate move on April 3.

“We are absolutely determined to return inflation to its target, and if that means continuing to raise interest rates and this is our main tool, then this is what we will do,” the governor of the Bank of Israel told CNN.

And Gil Buffman, chief economist at Bank Leumi, expects inflation to continue to rise above 5% in the next few months, expecting inflation to approach 4% over the next 12 months, which will push the Bank of Israel to continue raising interest rates in the coming months. In the coming months, it will reach about 5% and higher, especially if the shekel continues to weaken.

Meanwhile, the governor of the Central Bank of Israel also warned of the risk of a slowdown in premature interest rate hikes. “We know from the past that if you stop prematurely inflation can come back with a vengeance, so I would expect that at least around the world, we’ll see interest rates continue to rise for a little bit longer,” he said.

The Israeli economy had expanded by 6.5% in 2022, growing at a slower pace than the rapid expansion of 8.6% in 2021.

Gross domestic product increased by a seasonally adjusted annual rate of 5.8% in the fourth quarter of 2022, exceeding analysts’ expectations.

In 2022, average growth among Organization for Economic Co-operation and Development (OECD) countries will be 2.8%.

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